How the Military Industry Drives the Development of the Semiconductor Industry

On April 27, the U.S. Department of Commerce announced that to prevent U.S. technologies from being diverted for military use, U.S. companies must obtain government approval to sell certain items, even civilian ones, to Chinese military-industrial enterprises. A subsequent report by the Wall Street Journal stated that the new regulations grant U.S. Department of Commerce officials greater authority to block the export of U.S. products in semiconductors, aerospace and other industrial sectors overseas. Recently, a research report released by Founder Securities pointed out that military semiconductors are the key to realizing equipment informatization. On the one hand, the development of defense equipment is moving toward intelligence and unmannedness; on the other hand, with the completion of the Beidou-3 system deployment and the continuous increase in 5G penetration in China, new semiconductor technologies and materials will be gradually applied to defense equipment. Therefore, relevant electronic components have become the key to achieving equipment informatization. Looking back at the history of semiconductor development, the United States, as the earliest country to develop the semiconductor industry, has an inseparable connection between its semiconductor industry and defense military institutions from the very beginning, and the birth and development of important technologies all bear the characteristics of military-civilian integration. Semiconductors Moving from the Military to the Civilian Market Semiconductor technology initially served the military field. In July 1943, the U.S. Army funded an electronic digital computer development project — the Electronic Numerical Integrator and Computer (ENIAC), used to calculate artillery firing tables. Later, John von Neumann participated in the ENIAC project in depth, and the "von Neumann architecture" proposed by him, including arithmetic unit, controller, memory, input and output, greatly promoted the development of electronic technology and computers. It is understood that ENIAC mainly used electronic diodes and triodes at that time. However, due to the inability of electronic tubes to withstand the complexity of ENIAC, several tubes burned out every day, leaving ENIAC in a functionally impaired state for almost half of the time. It was not until 1947 that Bell Labs invented the transistor, which brought a breakthrough opportunity for electronic products. After Bell Labs invented the transistor, the U.S. military has been funding the development of this technology. According to a research report by Great Wall Securities, from 1948 to 1957, the military bore 38% of the $22.3 million transistor research costs of Bell Labs. Especially in the mid-1950s, military funding for Bell Labs once reached 50% of the transistor research budget. The first contract between Bell Labs and the military was from 1949 to 1951, focusing on application and circuit research; the second contract was from 1951 to 1958, mainly carrying out research on services, facilities and materials of interest to the military. Relevant data shows that in the early 1960s, 80%-90% of U.S. chip products were ordered by the Department of Defense. During this period, three major projects — the Minuteman missile, the Apollo navigation computer and the W2F combat aircraft data processor — drove the rapid development of the U.S. semiconductor industry. Even in the 1970s, the U.S. military had a huge impact on its semiconductor industry. According to a report by Forward-looking Industry Research Institute, the proportion of military chips was still as high as 42% in the 1970s. It was also during this period that the U.S. microelectronics industry began to consider the transition of semiconductors from military to civilian use. After the end of the Cold War, the U.S. Department of Defense released the Defense Science and Technology Strategy, which was revised twice in 1994 and 1996. Among them, in the second revision, "emphasizing economic affordability and implementing military-civilian dual-use on the premise of maintaining military technology" became the guiding ideology of the strategy. Coincidentally, the personal computer trend began to prevail during this period, and semiconductor technology also gradually developed from the military market to the civilian market. Semiconductor Technologies Originating from the Military Field Reviewing the history of semiconductors, we find that many semiconductor technologies were born in the flames of war and later entered the mass market after continuous development. These include the Frequency Hopping Spread Spectrum (FHSS) technology that has influenced the development of Bluetooth and WiFi. This technology was born during World War II, and in the 1980s, FHSS technology was used by the military in wireless communication systems on the battlefield. Later, FHSS technology sank to the mass market, and Bluetooth technology based on it began to attract the attention of the industry. Subsequently, five companies including Ericsson, Nokia, Toshiba, IBM and Intel founded the predecessor of the Bluetooth Special Interest Group. After years of development, the Bluetooth standard has undergone multiple iterations, and the related low-power Bluetooth chips have also occupied an important position in the semiconductor market. The changes brought by autonomous driving technology to the automotive industry have also affected the development of the semiconductor industry. Many of the numerous sensors required for autonomous driving originate from the military field, such as millimeter-wave radars and infrared detectors. Taking millimeter-wave radar as an example, in the 1950s, millimeter-wave radars for airport traffic control and marine navigation appeared. In the late 1970s, millimeter-wave radars were already applied in many important civilian and military systems. In the 1990s, millimeter-wave radars of 60GHz, 77GHz and 94GHz were developed. The 60GHz frequency band was later mainly used for communication, the 94GHz is mainly a military frequency band, and the industry chose 77GHz as the mainstream frequency band for millimeter-wave radars. With the progress and maturity of radar technology, since the beginning of this century, fields such as automobiles and industry have begun to adopt millimeter-wave radars to help vehicles achieve assisted driving functions. In addition, the outbreak of the COVID-19 pandemic has spurred the demand for infrared temperature detection equipment, which involves infrared imaging. The infrared imaging system converts detected thermal infrared rays into images, and the infrared detector is the core component of the system. Due to the high price of infrared technology in the early days, it was first applied in the military field. Later, with the continuous development of infrared imaging technology and the rise of low-cost civilian markets such as security and thermal imagers, it has brought opportunities for the development of infrared detectors. At the same time, some institutions believe that the future vehicle-mounted infrared market will also bring opportunities for the development of infrared detectors. The infrared technology that has sunk from the military market to the civilian market also involves two major types of infrared material technologies: III-V semiconductors and II-VI semiconductors. According to an article published on Zhihu by Song Zhigang, a researcher of semiconductor physics and optoelectronic devices, in the 1980s, the U.S. infrared market was dominated by two material technologies: InSb and HgCdTe, mainly concentrated in the defense and military industry. In 1981, DARPA's focus on infrared research and development was on confidentiality and inefficiency, and launched a series of U.S. II-VI material physical and chemical seminars. In the following nine years, the academic and industrial circles worked together to witness the rapid development of II-VI infrared materials. The vapor phase growth technologies of II-VI infrared materials include Molecular Beam Epitaxy (MBE) and Metal-Organic Chemical Vapor Deposition (MOCVD). As we all know, MOCVD is the key to VCSEL. At present, the demand for 3D sensing and more mobile phone applications is driving the rapid development of the VCSEL market. Certainly, there are far more semiconductor technologies that have moved from the military market to the civilian market than these, but even this small part is enough to prove the driving effect of the military field on the semiconductor industry. The Importance of the Semiconductor Field Semiconductor technology is undoubtedly of great significance to the military field. Among them, many semiconductor companies have been involved in the military or national defense field in the early days. The well-known Texas Instruments is one of them. Texas Instruments was formed by the reorganization of Geophysical Service Incorporated (GSI), which initially produced equipment related to the seismic industry and defense electronics. In 1961, TI manufactured the first integrated circuit computer for the U.S. Air Force. In the late 1950s, TI began to study infrared technology, and then set foot in the manufacture of radar systems, navigation and control systems for missiles and bombs. In the 1970s and 1980s, the company's business focused on household electronic products, such as digital clocks, electronic watches, portable calculators, home computers and various sensors. In 1997, the company sold its defense business to Raytheon Company of the United States. Later, Texas Instruments acquired National Semiconductor and started its journey in the analog field. From the current business structure of semiconductor companies, although many semiconductor giants have abandoned their military field departments, from their revenue perspective, a part of their income still comes from the national defense field. As the semiconductor technologies required by the military market and the civilian market overlap more and more, a group of arms dealers are also developing their own semiconductor businesses. Raytheon Company, the buyer of Texas Instruments' defense business, is a major U.S. defense contractor (in 2019, United Technologies and Raytheon reached a merger agreement, and the new company will be named Raytheon Technologies Corp). But Raytheon also manufactures semiconductors for the electronics industry. According to relevant data, it once produced a wide range of integrated circuits and other components at the end of the 20th century, but since 2003, its semiconductor business has specialized in gallium arsenide (GaAs) components for radio communication, and it is also trying to develop gallium nitride components for next-generation radar and radio. Lockheed Martin, the world's largest arms dealer, also has related semiconductor business. According to relevant reports, in 2006, the State Radio Regulatory Commission of China (SRRC) approved Savi Technology's 433MHz RFID products, allowing the company's products to be sold and used in China. Savi Technology is a wholly-owned subsidiary of Lockheed Martin and a supply chain solution provider based on Active Radio Frequency Identification (RFID). In 2017, the U.S. President's Council of Advisors on Science and Technology released a report entitled Ensuring America's Long-Term Leadership in the Semiconductor Industry. The abstract of the report stated that advanced semiconductor technology is an important guarantee for national defense and the military. To this end, John Holdren, then Assistant to the President for Science and Technology and Director of the White House Office of Science and Technology Policy, led the establishment of a leading group, whose members included senior personnel from the U.S. chip-related industries and suppliers of its defense equipment. The co-chairman was the former CEO of Intel, and the members included the former chairman of Freescale Semiconductor, the former CEO of GlobalFoundries (the world's second-largest wafer foundry), the chairman and CEO of Northrop Grumman (the world's fourth-largest arms dealer), a former senior consultant of Microsoft, the former chairman and CEO of Applied Materials, and the vice chairman of Qualcomm, among others.